Definition: The general and administrative expense budget is usually prepared by an office manager to predict what the non-selling expenses will be for the period. Selling expenses are all expenses that have to do with selling a product like advertising, promotions, sales commissions, and shipping goods to customers.
What Does General and Administrative Expense Budget Mean?
Most companies prepare a variety of budgeting during the year help keep track of expenses and make sure profit goals are met. These budgets can deal anything from the operations of the company to buying inventory. One of the main budgets that management produces is the general and administrative expense budget.
The general and administrative expense budget focuses on operating expenses like administrative salaries, depreciation, and office expenses. These non-selling expenses can be planned and predicted. The general and administrative expense budget usually includes both fixed and variable costs. The office manager can easily estimate the depreciation for the period.
Some non-selling expenses can’t be included in the general and administrative expense budget, however. Expenses like interest and income taxes have too many variables to predict. Since the general and administrative expense budget is usually made before the capital expenditure and cash budgets, management doesn’t know how much debt the company will have for the period. Interest can’t be calculated without an accurate debt estimate.
Income taxes are also somewhat unpredictable. Even profitable companies can show little taxable income with accelerated depreciation options. There is no way to predict taxable income before the end of the year.